Tech stocks mixed as Cisco weighs

SAN FRANCISCO (CBS.MW) - Technology stocks closed mixed on a quiet trading day as many investors awaited the results of Cisco Systems' second-quarter report after the market closed.

Cisco
CSCO, -0.98%
rose 21 cents to close at $26.41 before posting its anticipated quarterly results. Excluding one-time items, the Internet-traffic maker earned 18 cents a share on revenue of $5.4 billion to top the estimates of analysts surveyed by Thomson First Call. See full story.

IBM
IBM, -1.15%
ended the day on an upbeat note, rising 61 cents to close at $100 amid a report that it will take over some of the wireless customer-care operations for Sprint
FON, +0.00%
Between 5,000 and 6,000 Sprint jobs will move to IBM as part of the deal.

It was also the first time Big Blue's shares closed at the $100 mark since March 2002.

But Hewlett-Packard
HPQ, -1.03%
shed 19 cents to close at $23.91 after saying it had signed a five-year, $400 million outsourcing contract with mobile-phone giant Nokia
NOK, +0.35%

Chip-equipment makers continued to receive mixed views from industry analysts. Goldman Sachs analyst James Covello downgraded his rating on the semiconductor equipment market to "neutral" from "attractive" on the belief that the sector has passed its normal free-cash flow levels.

Covello said that because chip-equipment stocks tend to move upward in cycles, those issues stop outperforming the market once they reach normal free-cash flow points. Covello sees the sector as being in line for slow long-term growth.

"Once an industry moves beyond normalized levels of free cash flow, that stream of cash flows is by definition unsustainable," Covello said in a research note. "And no one should own a stream of anything that is unsustainable."

As part of the sector downgrade, Covello lowered his ratings on Applied Materials
AMAT, -0.82%
which rose 9 cents to $21.68; Novellus Systems
NVLS
down 50 cents to finish at $32.95, and Advanced Energy Industries
AEIS, -1.32%
which fell 21 cents to end the day at $21.47.

Covello also raised his ratings on KLA-Tencor
KLAC, -3.37%
and FormFactor
FORM, -1.68%
on the grounds that those companies have a higher exposure to technology transitions. KLA-Tencor's shares climbed 83 cents to close at $56.59, while FormFactor rose 55 cents to $18.49.

Dell
DELL
added 18 cents to close at $33.70. Prudential Equity Group analyst Steven Fortuna said the No. 1 personal-computer maker seems to have weathered a tough holiday season and its fourth-quarter should be in line with estimates when it delivers results next week. Analysts estimate Dell will earn 28 cents a share on $11.5 billion in revenue.

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